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3 Emerging Market Blue Chips for Growth, Value and Income

NEW YORK (TheStreet) -- China Mobile (CHL), Sasol (SSL) and Philippines Long Distance Service (PHI) are large-cap stocks with a lot to offer. With these stocks, long-term growth, value and income investors have the opportunity to profit from the expanding consumer class in growing emerging market nations.

According to a report from McKinsey & Company, Capturing the World's Emerging Middle Class, spending by the middle class in emerging market countries will increase from just under $7 trillion in 2010 to around $20 trillion by 2020. That is about twice the current spending level in the United States. China Mobile, Sasol Ltd, and Philippines Long Distance are all in position to gain from that growth.

China Mobile is the world's largest mobile phone company.

In that capacity, it should benefit from the rise of the Chinese consumer. As detailed in another article on TheStreet, the Chinese Government wants to increase the role of consumer spending in the country's economy. With 760 million customers, that should favor China Mobile. Down nearly 10% for 2014, China Mobile is trading at a price-to-earnings ratio of under 9. Combined with a dividend yield of 4.16% and a clean balance sheet with no debt, it is very appealing to growth, value and income investors.

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That is much the same story with South Africa's Sasol, an integrated oil and petrochemicals firm.

For income investors, it does not come much better than a 4.76% dividend yield. Growth investors should be pleased by the quarterly earnings-per-share and sales growth of more than 100% each. While that is clearly unsustainable, Sasol does have a forward price-to-earnings ratio of 8.48. As the present price-to-earnings ratio is 12.17, that is a bullish projection for the future. Sasol's profit margin of 33.90% and return-on-equity of 47.10% is far superior to others in its sector, such as BP PLC (BP) at 5.90% and 18.10%, respectively; Chevron (CVX), at 9.60% and 15.20%, respectively; and ExxonMobil (XOM) at 7.60% and 9.60%, respectively.

While China Mobile and Sasol will gain from regional growth, Philippines Long Distance Service is a play on the economy of the island nation.

But that is a promising one.

The last quarter of economic growth for the Philippines marked off the two strongest years since the 1950s post-World War II boom. According to the Philippines Statistics Authority, growth in 2013 was at 7.2%. The expanding economy is benefitting Philippines Long Distance Services, which was upgraded to a buy last month by Citigroup due to its valuations and position in the prepaid sector of the industry. Now trading just under $60 a share, the mean analyst target price for Philippines Long Distance Service over the next year is $77.54, according to Finviz. There is a dividend yield of 3.46% to sweeten the total return.

The "BP Energy Outlook 2035" predicts that 95% of the increase in the global demand for energy in the 2012 to 2035 period will come from emerging market countries.

That is where investors want to be as those countries have the economies that will be growing the most. Sasol Ltd, China Mobile and Philippines Long Distance Services should all prosper from the increasing consumer spending and economic activity in emerging market nations. As a result, growth, income and value investors should all do well from the total returns of these emerging market blue chips.

At the time of publication the author had no position in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

Jonathan Yates has written for numerous publications including Newsweek and The Washington Post. He is a former general counsel for a publicly traded corporation. Much of his career was spent working on Capitol Hill for Members of Congress in both the House and Senate. He has degrees from Harvard University, Georgetown University Law Center and The Johns Hopkins University.

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